Dealer Gamma (GEX), Explained — and Why It Moves the Market

Why does SPY pin to a level all day, then suddenly rip? The answer is dealer gamma. Here’s how it works, in plain English.

Options / GEX7 min readBacked by real backtests

Options dealers are on the other side of every trade you make. To stay neutral, they hedge — and how they hedge depends on their gamma exposure (GEX). That hedging is a massive, mechanical flow that quietly shapes the tape. Understand it and intraday moves stop looking random.

Positive vs negative gamma

The three levels that matter

The two edges (backtested on QQQ): In positive gamma, fading the walls hit ~65% of the time. In negative gamma, betting on a breakout hit ~28% — lower win rate, but the winners are the fat-tail days that pay for everything. Same map, two opposite playbooks.

How to actually use it

Check the regime first. Positive gamma above zero-gamma → fade extremes toward the walls, sell premium. Negative gamma below zero-gamma → stop fading, respect breakouts, buy optionality. Northtape computes this daily from end-of-day options data and surfaces the walls, zero-gamma line and regime on every ticker.

Key takeaways

  • GEX is dealer hedging flow — positive gamma dampens moves, negative gamma amplifies them.
  • Zero-gamma is the line that flips the market between "fade it" and "chase it."
  • Backtested edges on QQQ: fade the walls in positive gamma (~65% hit); expect breakouts in negative.

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FAQ

What does GEX mean in options?

Gamma exposure — the aggregate gamma dealers hold. It predicts whether their hedging will suppress volatility (positive) or amplify it (negative).

What is the zero-gamma level?

The price at which total dealer gamma flips from positive to negative. Above it moves tend to mean-revert; below it they tend to trend and accelerate.

What is a call wall / put wall?

The strikes with the largest gamma above (call wall) and below (put wall) spot. They act as a ceiling and floor because dealer hedging clusters there.